Exaxe
Re-Thinking Life.
December, 2006
In April, Exaxe™ exhibited at one of the UK’s leading annual conferences
for the L&P industry. Some of the industry’s thought leaders shared their
views on current issues and indeed, their dreams for their companies and their
views of life assurance in the future. We learnt that the mood within the
industry is changing with a shift from solvency and cost issues to distribution
and service but some old themes are again occupying the minds of top executives
and operational and risk managers.
Keynote speakers at the conference included:
- Sandy Crombie- Chief Executive of Standard Life
- Clive Cowdery- Executive Chairman for Resolution Plc
- Stephen Timms MP- Minister of State for Pensions Reform
- Otto Thoresen- Chief Executive for AEGON UK
- Nathan Moss- Managing Director of Marketing and Distribution for Scottish Widows
- David Harrison- Chief Executive PositiveSolutions
- Roger Ramsden- Managing Director for Prudential UK
- Charlie Eppinger-Chief Executive Cofunds
- John Spellman- Managing Director of HBOS Financial Services
For more information on The Rethinking Life Insurance Conference Telephone
Martin Fearnley on + 44 (0) 20 7582 6520 or email martinfearnley@westminsterandcity.co.uk
Over the last few years companies’ focus has been internal rather than external.
The big issues were solvency and cost management. The drivers were:
- Falling margins - product commoditisation
- Mis-selling - cost and creation of distrust within the public towards the Financial Service industry
- The high cost of distribution
Once again, the talk is around distribution and the customer. The new thesis is:
- Don’t neglect your existing customers
- The distribution model is broken. The triangle between manufacturer, distributor & customer is out of alignment
- Capital - use it or lose it
- Technology is a key enabler
The industry continues to face fundamental challenges.
Retention
- Companies are writing too much business that doesn’t stay on the books.
Sandy Crombie, Group Chief Executive Standard Life mentioned the 2/3rd 1/3rd
spend - 2/3rd on client acquisition, 1/3rd on retaining that customer. But,
that 1/3rd is further eroded on policy servicing. There is a great incentive
to bring down maintenance costs once the policy is sold with very little money
left to spend on establishing a long term relationship with the customer.
He advocates a rethink. He noted the role of technology as a great enabler
– a) to achieve those process and business efficiencies and b) to provide
tools to support distribution. Leveraging technology is critical to achieve
cost and process efficiencies and improve service.
Trust/distrust
continuum - The road to building consumer confidence stretches
far. Consumers bought products in good faith but sometimes with little understanding.
Real damage has been done to the industry through poor selling practices and
bad value products, both in design and price.
The
distribution model is broken - Clive Cowdery, Executive Chairman
Resolution Life says end the war - we need a new distribution model: we need
to change how we sell insurance and relate to customers.
The economies of outsourcing distribution to IFAs is economically strained,
so noted Otto Thoresen Chief Executive Aegon UK. Large amounts of money are
paid into distribution to sustain the channel. David Harrison, Chief Executive
of PositiveSolutions and previously an industry award winning IFA, controversially
suggested that manufacturers were paying too much commission to the IFAs –
they never asked for it and we would all be better served with more reasonable
commission remuneration. This would help build trust with the consumer: the
IFAs would be encouraged to get out and sell more which would ultimately
help society by getting more people insured and provided with pension cover.
On average an IFA sells 1.2 polices per week, generating an income of £70k.
If his/her commission per sale goes down he/she will be motivated to sell
more. It is a simple law of economics.
On top of this, the number of IFAs is radically falling. There are now 45,000
people actively selling financial services in the UK, down from a figure of
over 220,000 in the heyday of financial services salesforces.
As with other speakers, David Harrison commented on the importance and role
of technology in PositiveSolution’s model. He talked about "unique service"
as a differentiator:
- Invest in systems that strip out costs
- Speed is essential - thus electronic
- Differentiate firstly through efficiency - not buying new business - service not lunches
He advocated coupling electronic service with "expert" advice.
Capital
value - Companies are over capitalised with management holding
reserves in case something goes wrong. This is not sustainable. Companies
need to use their capital, otherwise they will be forced to give it back to
their shareholders.
How can Exaxe help?
As Sandy Crombie points out, technology is a great enabler. Technology coupled
with service allows providers get more out of their customers. IFAs and distributors
need tools to build that long-term relationship with the customer. Exaxe's
life-styles are increasingly complex: there is a complexity of needs in retirement
and retirement planning.
Exaxe’s Illustrate Plus™ illustrations and calculations solution is
designed to address the industry’s two key drivers:
- The achievement of cost efficiencies through process improvement
- Providing the IFA/distributor with a real-time illustration engine to allow him/her interact on a meaningful basis with the client
And, illustrations is taken off the critical path in terms of bringing new
products to the market. The need for scarce actuarial and IT resources
is radically reduced.
Talk to Exaxe about Illustrate Plus
Exaxe’s Agency Plus™ and Commission Plus™ products have been designed as a strategic solution for the new Life & Pensions world.
Delivering industry leading service levels to Distributors, including Financial Advisors
Achieving cost efficiencies through process improvement, reduction in commission leakage, and data error
Compliance modules built into the system: design allows for minimal configuration for future compliance requirements
In the UK, depolarisation has led to increasingly complex relationships between
providers, distributors, (Networks and individual agents) and the customer.
There has been a power shift between the provider and broker. Networks are
demanding minimum service standards as part of their provider selection criteria.
Life providers will need to seduce the networks into selecting them. As we
heard at the conference, this means improving and differentiating one’s service
offering but without increasing costs.
Product margins cannot absorb a further cost loading. The challenge for the
provider is to maintain costs while, enhancing service-levels.
Technology on its own may not be the panacea but efficient technology alongside
distribution can provide many of the answers. Life providers must look to
achieving efficiencies while at the same time improving service levels to
their distribution networks. This is a new and agile market. The manufacturer
needs to be able to respond dynamically to change in an ever-changing market
- to support constant change rather than moving from one static market type
to another static market type.
To finish on a note from Otto Thoresen where he spotlighted technology as
a key enabler:
"Regardless
of form of distribution, leveraging technology is critical Both to deliver
a good value client proposition and, To efficiently manage businesses’ risk
management and deliver profitability.IT exists: it needs to be effectively
utilised."
